A form of market where buyers bid the price they are prepared to pay for a good or service. The highest bid is accepted.
Barter
The swapping of goods/ services for other goods/ services – requires a “double coincidence of wants”
Black Market
Where goods and services are sold illegally (or without taxes being paid)
Capacity
A person must be solvent, sober and sane to enter a contract. Some contracts require parties to be over 18years old.
Caveat Emptor
“Let the buyer beware”
Consumer Guarantees Act 1993
Protects consumers AFTER they have purchased a good or a service.
Consideration
Something of value must be exchanged for a contract to be valid (e.g. money)
Contract
An agreement between at least two competent parties that creates an obligation enforceable by law – a VALID contract must contain essential elements – intention, offer &acceptance, legality, consent, capacity, and consideration – otherwise it is VOID.
Direct Tax
A tax on income – paid directly to IRD by person or business levied e.g. PAYE, RWT, and Company Tax.
Equilibrium Price
The price where quantity demanded = quantity supplied; where the market clears.
Equilibrium Quantity
The quantity that is bought and sold at the equilibrium price
Excess Demand (Shortage)
At any price below equilibrium quantity demanded exceeds quantity supplied – eventually consumers will bid up the price to guarantee purchase and equilibrium returns
Excess Supply (Surplus)
At any price above equilibrium quantity supplied exceeds quantity demanded – eventually producers will lower price to sell excess stock and equilibrium returns
Fair Trading Act 1986
Designed to prevent misleading and unfair practices by sellers.
Functions of Money
Standard of value; medium of exchange; store of value and means of deferred payment.
Indirect Tax
A tax on spending – paid indirectly to IRD by sellers or producers of the goods and services on which the tax is levied.
Market
A place or situation where buyers and sellers meet to exchange goods and services.
Market Equilibrium
Where quantity demanded = quantity supplied – it is the only place a market can operate in the long run.
Market Forces
Result from producers and consumers operating in their own self interest – returns shortages and surpluses to equilibrium.
Maximum Price
A price ceiling set by government in an attempt to keep goods and services affordable to low income earners – causes excess demand.
Minimum Price
A price floor set by the government in an attempt to keep producers in a market e.g. minimum wage – normally creates excess supply.
Non-price competition
Firms compete using product differentiation and variation to increase market share
Price Competition
Firms compete on price to increase market share by using methods such as: “buy one get one free”, sales, interest free credit and loss leaders.
Product Differentiation
Methods employed by producers to make consumers believe a product is different e.g. location, packaging and sponsorship.
Product Variation
Real difference in the product e.g. deluxe station wagon and economy car etc.
Qualities of Money
Money has 7 qualities that make it a good medium of exchange – it is acceptable, recognisable, stable, portable, divisible, durable and scarce.
Subsidy
A payment to producers to encourage production of a good or service
Tender
A form of price setting where buyers place their bid in writing.
Auction
Contract
An agreement between at least two competent parties that creates an obligation enforceable by law – a VALID contract must contain essential elements – intention, offer &acceptance, legality, consent, capacity, and consideration – otherwise it is VOID.
Direct Tax
A tax on income – paid directly to IRD by person or business levied e.g. PAYE, RWT, and Company Tax.
Equilibrium Price
The price where quantity demanded = quantity supplied; where the market clears.
Equilibrium Quantity
The quantity that is bought and sold at the equilibrium price
Excess Demand
(Shortage)
At any price below equilibrium quantity demanded exceeds quantity supplied – eventually consumers will bid up the price to guarantee purchase and equilibrium returns
Excess Supply
(Surplus)
At any price above equilibrium quantity supplied exceeds quantity demanded – eventually producers will lower price to sell excess stock and equilibrium returns
Fair Trading Act 1986
Designed to prevent misleading and unfair practices by sellers.
Functions of Money
Standard of value; medium of exchange; store of value and means of deferred payment.
Indirect Tax
A tax on spending – paid indirectly to IRD by sellers or producers of the goods and services on which the tax is levied.
Market
A place or situation where buyers and sellers meet to exchange goods and services.
Market Equilibrium
Where quantity demanded = quantity supplied – it is the only place a market can operate in the long run.
Market Forces
Result from producers and consumers operating in their own self interest – returns shortages and surpluses to equilibrium.
Maximum Price
A price ceiling set by government in an attempt to keep goods and services affordable to low income earners – causes excess demand.
Minimum Price
A price floor set by the government in an attempt to keep producers in a market e.g. minimum wage – normally creates excess supply.
Non-price competition
Firms compete using product differentiation and variation to increase market share
Price Competition
Firms compete on price to increase market share by using methods such as: “buy one get one free”, sales, interest free credit and loss leaders.
Product Differentiation
Methods employed by producers to make consumers believe a product is different e.g. location, packaging and sponsorship.
Product Variation
Real difference in the product e.g. deluxe station wagon and economy car etc.
Qualities of Money
Money has 7 qualities that make it a good medium of exchange – it is acceptable, recognisable, stable, portable, divisible, durable and scarce.
Subsidy
A payment to producers to encourage production of a good or service
Tender
A form of price setting where buyers place their bid in writing.